Shell dominates carbon credit market as clean energy spending scaled back

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Shell dominated the $1.4bn global market for carbon credits last year as oil and gas companies scaled back their spending on clean energy and relied more heavily on offsets to reach their climate targets than any other sector.

Credits represent a tonne of CO₂ or other greenhouse gases reduced, removed or saved, and are used as a cheap way to progress towards climate promises made to investors.

UK-listed oil majors Shell and BP rolled back their clean energy spending last year. Shell also weakened its climate targets.

The voluntary carbon market runs alongside larger and more expensive trading systems run by governments, including the EU’s Emissions Trading System under which polluters trade permits giving them the right to emit.

Shell uses credits to help keep some of its climate promises, including a target to cut emissions per unit of energy sold by 15 to 20 per cent by the end of the decade compared with 2016.

To be used as offsets, credits must first be “retired”, meaning they cannot be traded further so the saving can only be counted once.

MSCI Carbon Markets, whose preliminary data for last year covers major platforms that issue carbon credits, said Shell removed 14.9mn credits from global trading in 2024, more than twice as many as Italian energy producer Eni, the next biggest user.

Separate data shows Shell retired nearly three times more credits than the next most prominent user, Microsoft, last year, Allied Offsets told the Financial Times. Its database covers 99 per cent of the market.

“We retire credits to compensate emissions, including those associated with the energy our customers use in transport, homes, producing goods and providing services,” Shell said.

It added that “decarbonisation must start with avoiding and reducing emissions”, but that carbon credits could “compensate” for emissions where it was not possible to swap technologies for zero-emission alternatives fast enough. 

Voluntary carbon markets outside the jurisdiction of governments have been rocked by accusations of fraud, double-counting, abuse of indigenous communities and flawed methodologies.

Since then energy groups have paused some of their purchases of new credits backed by green projects, such as planting trees or storing CO₂ underground, said Dirk Forrister, chief executive of the International Emissions Trading Association, a Switzerland-based lobby group.

But they have been using up their old stock of credits and counting them towards climate goals.

By contrast tech groups such as Microsoft have continued to strike new deals to offset their AI-fuelled emissions in years to come. “Tech may have risen a little bit, oil and gas pulled back some,” Forrister said. 

European oil groups — Shell, BP, TotalEnergies, Eni and Equinor — are still committed to net zero emissions by 2050, suggesting they must invest in credits if they want to avoid overhauling their entire business model. 

The fossil fuel sector overall was responsible for more than four in 10 credits used last year, three times more than any other sector, and a slightly higher proportion than 2023, MSCI’s data also show. 

Shell has retired more credits cumulatively than any other company, Allied Offsets said, with the vast majority of these linked to projects that avoid hypothetical emissions, such as when a forest is protected from being cut down. 

A person close to Shell said its portfolio of credits was linked to “a wide range of diverse projects across the world”.